Redington Ltd - Resilient revenue growth amid ongoing ME tensions - Company Update

Redington’s Revenue, EBITDA and PAT were ahead of our estimates. The company delivered a strong Q4FY26 performance led by robust India growth, large enterprise and data centre deal execution along with continued momentum in cloud and software businesses. India revenues grew strongly across mobility, PCs, and enterprise infrastructure, while the Middle East business saw softness in March due to execution delays and insurance/freight disruptions. EBITDA margins remained broadly stable, though profitability witnessed pressure from elevated investments in AI capabilities, professional services and higher operating costs linked to the West Asia conflict. We remain optimistic on FY27 growth, supported by strong hyperscaler/data centre demand, expanding SSG contribution and healthy enterprise pipelines, although working capital requirements and near-term Middle East uncertainty are expected to remain elevated. We maintain BUY with a target price of Rs 340.

Revenue supported by strong India execution despite Middle East disruptions:

Redington reported a strong Q4FY26 with revenue growth of 25% YoY to Rs 332.7bn, driven by robust execution across India, large enterprise and data centre deals, and continued momentum in cloud and software businesses. India business grew 50% YoY led by PCs, mobility, cybersecurity, and hyperscaler-related demand, while Middle East performance was impacted during March due to geopolitical tensions, logistics disruptions, insurance withdrawal, and supply-chain bottlenecks. Mobility grew 19% YoY, Endpoint Solutions Group (PCs) increased 28%, Technology Solutions Group (TSG) grew 34%, while Software Solutions Group (SSG) saw growth of 31% YoY. Large deal execution accelerated meaningfully during Q4FY26, with total large deal value crossing ~Rs 16bn during the quarter and ~Rs 25bn for FY26. The company expects hyperscaler, AI infrastructure, cloud, and data centre demand to remain key growth drivers through FY27E, although Middle East hardware demand may remain soft over the next 1–2 quarters depending on geopolitical normalization

Margins impacted by capability investments and geopolitical costs:

Redington reported 1.5% yoy decrease in Q4FY26 EBITDA due to elevated investments across AI capabilities, professional services, digital platforms and enterprise solution capabilities. Q4FY26 PAT (excluding exceptional items) jumped 38.1% at Rs 4.4bn, aided by better operational performance and higher other income. Investments towards AI labs, cloud/security capabilities, customer lifecycle platforms, and enterprise solution expansion are expected to continue over the next 1–2 years. Working capital days improved to ~30 days reduced by 4 days in FY26; however, we expect working capital days to increase in FY27E due to large data centre deals, higher inventory requirements amid component shortages and extended customer credit cycles.

Strong enterprise, cloud and data centre pipeline provides healthy visibility:

Redington continues to witness strong momentum across hyperscaler infrastructure, enterprise cloud, cybersecurity, and AI-led opportunities. India’s data centre market is expected to expand from ~1.5GW currently to ~7.5GW over the coming years, creating significant long-term opportunities for the TSG business. SSG contribution increased to 17% of FY26 revenues versus 15% in FY25, supported by strong growth in cloud and software businesses. The company also launched an AI Exchange marketplace with 200+ AI agents and continues to expand partnerships with hyperscalers, ISVs, and enterprise technology vendors. Management expects strong growth momentum in India and Africa to continue through FY27E, while Middle East recovery is expected to depend on normalization of geopolitical conditions and resumption of delayed enterprise and government projects.

Valuation, View and Risk:

We have largely maintained our FY27/28E earnings estimates, despite Q4FY26 performance coming in ahead of expectations, as most of the outperformance has already been factored into our FY27–28E forecast. However, we have revised our target multiple downward from 14x to 12x to factor in continued uncertainty surrounding the Middle East slowdown and ongoing challenges in the Arena/Turkey business, which could persist for another year. We expect Redington Limited to deliver Revenue/EBITDA/PAT CAGR of 15.7%/16.9%/7.3% over FY25-FY28E, supported by strong momentum in India, scaling cloud and software businesses and growing hyperscaler/data centre opportunities . Key risks include prolonged geopolitical disruptions in the Middle East and continued losses or further deterioration in the Arena/Turkey business.

Company website: https://redingtongroup.com/

*CMP is as per report published date

Click to download the full Redington Ltd Q4FY26 Company Update

Analyst:

• Vinay Menon - Senior Research Analyst, Institutional Equities (NISM-201600112117)
• Miloni Mehta - Research Associate, Institutional Equities (NISM-201800127664)

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FAQs on Redington Ltd Q4FY26 Company Update

Here are quick answers to common investor questions about the Redington investment opportunity, including entry levels, targets and key risks.

1. What drove Redington’s Q4FY26 growth?

Strong India execution, hyperscaler demand, enterprise infrastructure deals, cloud growth and cybersecurity solutions supported revenue growth during the quarter.

2. Why did Middle East operations remain weak?

Geopolitical tensions, logistics disruptions, insurance withdrawal and delayed project execution impacted business activity in the region.

3. What are the key growth drivers for FY27?

Data centre expansion, hyperscaler infrastructure demand, cloud adoption, AI-led opportunities and enterprise technology spending are expected to drive growth.

4. How is Redington expanding its AI capabilities?

The company continues investing in AI labs, digital platforms, enterprise services and launched an AI Exchange marketplace with 200+ AI agents.

5. What are the major risks for Redington?

Key risks include prolonged Middle East geopolitical disruptions, working capital pressures and continued weakness in the Turkey business.

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